Smith & Nephew shares surged again today as the City geared up for a transatlantic bidding war for the FTSE 100 artificial knee and hip maker.
US medical-device specialist Medtronic is understood to be considering an approach for the British company in a move which could see it move its tax domicile to the UK — one of the reasons which was also cited by American group Pfizer when it first made its ultimately unsuccessful bid for pharmaceutical giant AstraZeneca.
Medtronic’s interest in Smith & Nephew, which has a market value of about £9.5 billion, comes just days after its US rival, Stryker, admitted it was also looking at the group.
Under UK rules, Stryker’s decision to declare an interest prevents it from making an approach for six months unless the Smith & Nephew board invites it back or there is a rival bidder.
Mick Cooper, analyst at Edison Investment Research, said: “The benefits of tax inversion appear to be a key driver of the apparent interest in Smith & Nephew by Medtronic and Stryker, as it was for Pfizer with AstraZeneca.
“There would also be a solid strategic rationale for a deal with either company, but given Smith & Nephew’s impressive development under [chief executive] Olivier Bohuon, a material premium would need to be offered by any potential bidder.”
Shares in the group rose by more than 5% to 1117.6p today, meaning they are now up by almost 10% over the past week.
Analysts at Credit Suisse said: “We would expect the UK Takeover Panel to approach Medtronic in due time to clarify its intention to either launch a formal offer within 28 days or refrain from such in the next six months.
“We estimate Stryker has higher cost -synergy opportunities given substantial business overlap.”
